Social Health Insurance vs. Tax-Financed Health Systems

Adam Wagstaff
The World Bank - Development Research Group
Human Development and Public Services Team - Policy Research Working Paper 4821
January 2009

Available online PDF file [39p.] at:
http://www-wds.worldbank.org/external/default/WDSContentServer/IW3P/IB/2009/01/21/000158349_20090121101737/Rendered/PDF/WPS4821.pdf

“…..This paper exploits the transitions between tax-financed health care and social health insurance in the OECD countries over the period 1960–2006 to assess the effects of adopting social health insurance over tax finance on per capita health spending, amenable mortality, and labor market outcomes. The paper uses regression based generalizations of difference-in-differences and instrumental variables to address the possible endogeneity of a country’s health system. It finds that adopting social health insurance in preference to tax financing increases per capita health spending by 3–4 percent, reduces the formal sector share of employment by 8–10 percent, and reduces total employment by as much as 6 percent.

For the most part, social health insurance adoption has no significant impact on amenable mortality, but for one cause—breast cancer among women—social health insurance systems perform significantly worse, with 5-6 percent more potential years of life lost.